When EV Rieu, the veteran editor of Penguin Classics - who launched the series after the second world war with a translation of The Odyssey completed between Home Guard duties - was shown a new cover design in 1963, he exploded with fury. "The old boy was bloodying and buggering all over the place," a colleague reported to Penguin's founder, Allen Lane.

The redesign was the work of Germano Facetti, who had joined Penguin as art director in 1961, charged with modernising its visual style. His crime, in Rieu's eyes, was to replace the spartan jackets with a reproduction of a painting, chosen to reflect the theme of each book. Thanks to Facetti's pictorial covers, Penguin Classics became visual icons of 1960s and 70s Britain. Yet to Rieu and fellow traditionalists, the stylistic frivolity of the paintings was an unwelcome distraction from their lovingly edited texts.

What would Rieu have made of the new series of Penguin Designer Classics commissioned to celebrate the 60th anniversary of Penguin Classics? The shoe designer Manolo Blahnik, artist Sam Taylor-Wood, fashion designer Paul Smith, architect Ron Arad and the graphic designers Fuel were each invited to choose a favourite book from Penguin's backlist and to design it as they wished. The results range from Fuel's constructivist-inspired version of Dostoyevsky's Crime and Punishment to a poignant Taylor-Wood photograph for the cover of F Scott Fitzgerald's Tender Is the Night - though the angriest outburst of "bloodying and buggering" would undoubtedly have greeted Blahnik's beautifully drawn, naughty-nurse vision of a near-naked Madame Bovary.

Opulent though these books seem, when compared with classic Penguins, they are not entirely at odds with their design heritage. The company was founded in 1933 by Allen Lane to publish good writing for the masses in paperbacks selling for sixpence each, the same price as a pack of 10 cigarettes. This democratising mission was reflected in Penguin's utilitarian style. Yet the defining principle of Lane's design philosophy was quality. "I have never been able to understand why cheap books should not also be well designed, for good design is no more expensive than bad," he wrote. Elegant typography and fine draughtsmanship became the hallmarks of Penguin's visual history, albeit with less lavish production values - and prices - than the new Designer Classics (£100 each).

Lane inherited his interest in design from an uncle, John Lane, who had founded the Bodley Head publishing house in 1889 and commissioned artists such as Aubrey Beardsley to design books as elaborate limited editions. The objectives for the first set of Penguin paperbacks were very different. Lane's priority was to produce a decent - and profitable - book for sixpence. His only hope of doing so was to minimise costs, which meant that every aspect of production had to be standardised, including the design.

Luckily for Lane, designing for mass-production in a frugal style was perfectly attuned to the modernist principles then being imported into Britain by the émigré architects and designers fleeing persecution in Continental Europe. The sparse horizontal grid of the early Penguin paperbacks with plain lettering and colour-coded covers - orange for fiction, green for crime and blue for biography - was the literary equivalent of other landmarks in early British modernist graphics, like Harry Beck's London Underground map.

Penguin was praised for its distinctive visual style, but the design of early books was haphazard at best. The design template was developed by Lane, helped by an artistic office junior, Edward Young, whom he dispatched to London Zoo to sketch a penguin for the logo. Editors and printers then "designed" each title in a similar style, with the result that all the books looked slightly different.

What we now think of as the classic Penguin cover was invented in 1946 by Jan Tschichold, the German typography designer hired by Lane to give the company a uniform design style. He specified exactly how each element of the book should be designed and where it should go, down to the size of spaces between letters and the Penguin logo, which he drew in eight "official" versions. Tschichold then wrote the Penguin Composition Rules, which were to be followed at all times, and harangued editors and printers if he spotted any lapses. Whenever the printers complained, he'd exaggerate his German accent and pretend not to understand them.

Described by Lane as "a mild man with an inflexible character", Tschichold personally designed over 500 books in three years at Penguin. Insisting on absolute consistency from the editors and printers, Tschichold indulged himself by experimenting with selected books, often drawing special typefaces, as he did to complement the portrait of Shakespeare created by the wood engraver Reynolds Stone for the Penguin Shakespeare series. He collaborated with other engravers and illustrators on Penguin Classics and Music Scores. When Dorothy Sayers complained that Tschichold hadn't stuck to his design rules for one of her translations, he replied: "The master is permitted to break the rules, even his own."

Tschichold was succeeded by Hans Schmoller, a fellow German, who was equally rigorous but less adventurous. By the early 60s, Penguin's once radical style looked dated, and Germano Facetti was brought in to refresh it. Advances in printing technology enabled the company to produce more visually sophisticated covers, and Facetti made the most of this by commissioning jackets from the young graphic designers then emerging in London, such as Derek Birdsall, Alan Fletcher and Colin Forbes.

He worked with Romek Marber on the redesign of Penguin Crime, using striking black and white images to convey the drama of the plot. Photograms were commissioned for the covers of Penguin Modern Poets, and pictorial covers developed for Penguin Classics. In the late 60s, Facetti flirted with psychedelia by hiring young illustrators such as Alan Aldridge. To reflect the darker mood of the early 70s, he experimented with a gritty, agitprop aesthetic. Typical were Birdsall's boldly typographic covers for the Education series and Richard Hollis's design of John Berger's Ways of Seeing, with the text starting on the jacket and breaking off in mid- sentence at the end. Ways of Seeing is now cherished by design buffs, but Schmoller, who'd stayed on as a director, was so incensed by its design that he threw the book down a corridor.

After Facetti's departure in 1972, Penguin's design turned conservative again, reaching a nadir in 1979 with MM Kaye's The Far Pavilions. The literati cringed at the sight of Penguin stooping to a TV tie-in, while designers winced at the Mills & Boonesque cover. Sadly, it set the tone for the 80s and 90s, when design was marginalised as Penguin adopted the financially driven culture of corporate publishing.

Two years ago, Penguin reasserted its old design values in Great Ideas, a series of political and philosophical polemics, including Machiavelli's The Prince and The Communist Manifesto, sold for £3.99 each. Sales expectations were low, and the production budget modest. The project was entrusted to the art director Jim Stoddart and a junior designer, David Pearson, who dressed each cover in lettering typical of the period and spirit of the book. Great Ideas won numerous design awards, and sold more than two million copies, roughly half of which, Penguin suspects, were bought because of their covers.

Penguin has since introduced other design-led classic collections, including a second series of Great Ideas and the Pocket Penguin essays and novellas with each cover created by a different artist or designer. This summer it launched Penguin Epics, the most dramatic passages from 20 epic texts in pocket paperbacks designed by Estuary English in a striking neo-gothic style intended to tempt video-game fans into reading Beowulf and Exodus

At a time when publishers are struggling to sell their backlists against stiff competition from online second-hand booksellers, Penguin has discovered that readers can be persuaded to buy new versions of old books, if the designs are seductive enough. The new Designer Classics collection is its most extravagant effort so far, and Penguin hopes it will prove as popular as inspired one-offs from the past, like Penguin Shakespeare and Ways of Seeing

That said, there is a glimpse of Penguin's spartan design origins in one of the Designer Classics. Ron Arad chose to redesign The Idiot, which he remembered fondly from his teens despite his dislike of Facetti's pictorial jacket. Dispensing with an image for his own cover, Arad confined it to the title, author's name and the opening page of the text. Even EV Rieu might have approved.